FTX, a cryptocurrency exchange that collapsed in November 2022, is now proposing a reorganization plan that would allow nearly all account holders to be repaid in full for their claims. Thanks to the recovery of billions of dollars more than initially anticipated, FTX has amassed roughly $15 billion primarily from selling venture capital investments made by the exchange and its affiliate Alameda Research. This amount is sufficient to fully repay nearly all creditors with claims of $50,000 or less, representing 98% of creditors. The remaining creditors will also receive a significant recovery, with a minimum payout of 118% of their claims. Additionally, the plan includes potential additional compensation to account for the time value of the money lost since FTX’s bankruptcy, meaning customers may also receive interest on their funds.
This payout to over 2 million customers is a rare occurrence in typical US bankruptcy cases, where creditors often receive only a fraction of what they’re owed. Some creditors could see a return of up to 142% of their original losses, which is significantly better than initial expectations. FTX had previously anticipated returning just 90% of customer funds but CEO John Ray III later told the court he expected full repayment for customers. The company is expected to have a significant surplus of cash ($16.3 billion) after selling all its assets, which is more than enough to cover what it owes to customers and other non-government lenders (about $11.2 billion).
FTX had been aggressively selling off its assets to raise the funds needed to repay creditors, including investments made by the exchange and its affiliate, such as an 8% stake in AI startup Anthropic that was sold to institutional investors for $884 million. The proposed distribution plan is contingent upon formal approval from the Delaware bankruptcy court. Even if approved, the disbursement of funds to creditors and account holders is likely a few months away as FTX navigates the concluding stages of its bankruptcy proceedings. The reorganization plan goes beyond simply repaying creditors and includes potential additional compensation for the time value of money lost since FTX’s bankruptcy, offering a significant recovery for nearly all account holders.
In summary, FTX’s reorganization plan proposes full repayment for nearly all account holders for their claims, with some potentially receiving additional compensation for the time value of money lost since the exchange’s collapse. This unexpected windfall is made possible by FTX’s recovery of billions more dollars than initially anticipated from selling venture capital investments. The plan includes a minimum payout of 118% of claims for all creditors, with some potentially receiving up to 142% of their original losses. This payout to over 2 million customers is a rare occurrence in US bankruptcy cases, where creditors typically receive only a fraction of what they’re owed. FTX is expected to have a significant surplus of cash after selling all its assets, which will be more than enough to cover what it owes to customers and other non-government lenders. The proposed distribution plan is contingent upon approval from the Delaware bankruptcy court, with a disbursement of funds likely a few months away as FTX navigates the final stages of its bankruptcy proceedings.
